Meet Tesla’s Model 3, Its Long-Awaited Car for the Masses

As if that weren’t enough, there’s another challenge to Tesla’s down-market move. The $7,500 federal tax credit that pushes the base price of the Model 3 below $30,000 won’t last forever. It only applies to the first 200,000 electric vehicles a manufacturer sells in the US. Tesla will be approaching that limit by the time the 3 hits the market late next year.But there’s some good news that will help Tesla.

The Good News

One of the biggest reasons EVs cost so much (compared to gas-powered cars) is the battery. The battery can account for one-third of the price of the car, which is why something like the Nissan Leaf or Fiat 500e costs about $30,000, while offering only about 100 miles of range. But those costs are falling, fast. Between 2010 and 2015, the average cost per kilowatt hour (kWh) dropped 65 percent, from $1,000 to $350, according to a recent report from Bloomberg New Energy Finance. “By 2022,” the report says, “the unsubsidized total cost of ownership of [battery electric vehicles] will fall below that of an internal combustion engine vehicle.”

It’s also important to remember that the Model 3 is just the start of a new line of vehicles. Musk has said Tesla will use the car’s core structure as the basis for a series of vehicles, including a small crossover. It’s a common industry move, a way to amortize the infrastructure costs over more vehicles. And taking preorders will help Tesla gauge how many cars it needs to build, avoiding the risk of producing more stock than it can sell.

Yellow and Purple I Learn My Way BannerThird, selling cars isn’t Tesla’s only route to the bank. California is one of 10 states that require automakers to offer at least some zero emissions vehicles. Automakers can circumvent that mandate by buying “ZEV credits” from automakers who find themselves with surplus credits. Tesla, which has a surplus of credits because it only sells electric cars, earned $51 million selling spare credits in the first quarter of 2015 alone. Those credits are slowly losing value under the complicated regulations governing them, but selling a lot more cars should make up for that.Ultimately, though, Tesla has earned the benefit of the doubt. Musk has consistently made big promises, then proved the doubters and naysayers wrong, first with the Roadster, then with the S and the X. Bringing zero-emission motoring to the proletariat and radically remaking how people get around is Tesla’s biggest promise, and Musk’s greatest challenge, yet. But together they’ve made it this far. Musk doesn’t always deliver on time or within budget, but he always delivers.

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